Report: Comcast, Disney to Control 40% of U.S. Content Spending; 20% Globally

Netflix currently tops global spending on original and licensed content with more than $12 billion in 2018. Following the mergers of Comcast/Sky and Disney/Fox, two of every five dollars spent on content in the United States will be spent by these four companies alone, according to new data from Ampere Analysis.

On a global basis, the companies will account for one-in-five (20%) content dollars spent, with overall spending on content almost even between the two merged companies. By Ampere’s estimates, the combined projected content spend between the two is set reach $43 billion – with Disney/Fox spending $22 billion per year on originated and acquired content and Comcast/Sky spending $21 billion by the end of 2018. This is more than the combined outlay of the next ten largest content spenders in the U.S., including Netflix and Amazon Prime Video.

London-based Ampere attributed the recent media mergers – including AT&T and Time Warner – as a reaction to the increasing power of online video platforms.

“[Netflix] has repeatedly stated it will continue to increase its content budget,” Ampere said in a statement. “Prior to the mergers, Netflix was on course to catch and overtake the top Hollywood studios in terms of content spend. However, in light of the two new combined entities, Netflix would now be required to nearly triple its spend to achieve this.”

Ampere said Comcast/Sky and Disney/Fox help strengthen the pay-TV and studio groups’ positions in the global market, as well as adding protection against the rising strength of online video.

Indeed, each company controls an increasingly vast library of original content that can be exploited through proprietary and third-party direct-to-consumer offers. Disney has already indicated it will stop licensing content to Netflix in favor of its own direct to consumer offer.

 

 

 

CFO: Comcast Wants ‘Healthy’ Relationship with Hulu

Hulu, the subscription streaming video service and online TV platform co-owned by Disney, Fox, Comcast and WarnerMedia, is valued by its corporate parents at more than $9 billion – despite posting hundreds of millions of dollars in equity losses.

Disney’s pending close of its $71 billion acquisition of 20th Century Fox Film, which includes Fox’s 30% stake in Hulu, will make the media giant majority owner going forward.

With WarnerMedia revealing a desire to sell its 10% Hulu stake, that leaves Comcast as a minority stakeholder to Disney’s vision for the 11-year-old over-the-top video platform going forward.

Speaking on last month’s fiscal call, Disney CEO Bob Iger said the company planned to incorporate Fox’s television production to up original programming at Hulu.

“We feel [that] will enable Hulu to compete even more aggressively in the marketplace,” said Iger.

Meanwhile, Comcast reported a $132 million equity loss at Hulu for the fiscal period ended Sept. 30 – up from an equity loss of $62 million during the previous-year period. Through nine months Hulu generated a $370 million equity loss for Comcast – more than double the cabler’s $168 million equity loss last year.

Speaking Dec. 4 at the UBS 46th Annual Global Media and Communications confab in New York, Comcast CFO Michael Cavanagh reiterated the company’s support for Hulu and belief that “some form of direct-to-consumer” product “will make sense for us.”

Whether that includes Hulu remains to be seen. Cavanagh wouldn’t offer any insight on possible changes in management’s mindset, saying only that the platform remained a good home for select NBC Universal programming.

“We want to continue to have a healthy relationship with Hulu,” he said. “We think much of our content finds a great home on that platform. And one way or the other, we want to make sure we have a good and healthy and constructive for everybody ongoing relationship with Hulu.”

 

Hulu Eyeing 23 Million Subs by Year’s End

Hulu is reportedly expected to top 23 million subscribers by the end of the year, according to comments made Dec. 4 by CEO Randy Freer at the Business Insider’s Ignition confab in New York.

The SVOD service co-owned by Disney, Fox, Comcast and WarnerMedia includes online TV platform Hulu Live with TV as part of its subscriber growth. The tally suggests Hulu added more than 3 million subs since it disclosed reaching 20 million subs at its upfronts content presentation earlier this year.

“I think our numbers will be really impressive,” Freer said, as reported by TechCrunch.com. “But we need to get 30, 40, 50 million homes in a way that we can scale.”

Indeed, even reaching an improbable 50 million subs would keep Hulu seven million shy of Netflix’s Q3 domestic count.

“Netflix has solidified their place for now,” said Freer. “Everybody else is going to fight out over what those four or five other selections are.”

Hulu has achieved one distinction even Amazon Prime Video can’t match: “The Handmaid’s Tale” remains a weekly Top 10 streaming favorite, according to Parrot Analytics.

Launched in 2008, Hulu is the only streaming service that offers both ad-supported ($7.99) and commercial-free ($11.99) subscription streaming options. Hulu with Live TV ($39.99) bowed in May, reaching 1 million subs in September.

The service features libraries of network TV series and movies; in addition to original content such as Emmy and Golden Globe Award-winning drama “The Handmaid’s Tale,” Emmy-nominated series “I Love You, America With Sarah Silverman,” Emmy-nominated series “The Looming Tower,” “Future Man,” “Marvel’s Runaways,” “Castle Rock,” “The First” and Golden Globe-nominated comedy “Casual,” as well as upcoming series “Catch-22,” “Ramy” and “Little Fires Everywhere.”

 

Stankey Discusses Advantages of Leveraging Licensed Content

As Disney and WarnerMedia ready flagship over-the-top video platforms for launch in late 2019, SVOD services such as Netflix are scrambling to minimize their risk to third-party content obligations.

Witness Netflix’s decision to cancel “Daredevil,” which was foreshadowed last month by the SVOD behemoth’s termination of original Disney/Marvel series “Iron Fist,” and “Luke Cage.”

Netflix’s exclusive pay-TV access to Disney theatrical titles ends this year.

While Netflix hinted that more adventures of Daredevil could eventually materialize in other mediums, the service took the high road saying — in a statement — that the three existing seasons would remain on the platform “for years to come,” while the Daredevil character “will live on in future projects for Marvel.”

To John Stankey, CEO of WarnerMedia, which owns Warner Bros., HBO and Turner, the move by Netflix to distance itself from third-party license agreements in favor of proprietary fare underscores ongoing changes in the OTT video landscape.

“A lot of those incumbents [i.e. Netflix] should expect that their libraries are going to get a whole lot thinner,” Stankey said Nov. 29 on AT&T’s analyst day event. “They are not going to be the same size they are today.”

Indeed, WarnerMedia and Disney can enhance the consumer value of their pending SVOD services simply by denying their content brands to Netflix & Co. — in effect depriving competing OTT services streaming access to valuable IP.

Stankey said the challenge for Netflix and other OTT services is to get their subs to pivot away from licensed content (about 70%, according to Stankey) to proprietary original fare. Regardless, Stankey said WarnerMedia wins as both a producer and distributor of original content.

“Maybe it sits in our library and maybe it sits in Disney/Fox,” he said.

The executive contends OTT video platforms will be structured differently in the next couple of years, including incorporating third-party content providers looking to piggyback on AT&T/WarnerMedia’s scale.

“I think structurally that is likely what will happen,” he said. “I believe we can play in that world going forward.”

 

AT&T Looking to Sell Off Hulu Stake

When AT&T acquired Time Warner for $85 billion, the purchase price pushed the telecom’s net debt skyward to about $170 billion by the end of the year.

Corporate debt (debt-to-pre-tax earnings ratio) is a relative thing. Too little and investors worry a company isn’t maximizing revenue potential. Too high and concerns about financing the debt and or worse loom into the picture. Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts.

AT&T will end 2018 with a debt ratio of 2.8.

For CFO John Stephens, who is tasked with decreasing that ratio, the solution involves scrutinizing internal overhead costs, reducing redundancies and liquidating non-core assets — such as WarnerMedia’s 10% stake in Hulu.

WarnerMedia, which includes Warner Bros., HBO and Turner, acquired the Hulu stake in 2016 for $583 million when it was Time Warner. The SVOD and online TV platform with 20 million subscribers is co-owned by Disney, Fox and Comcast and reportedly valued at more than $9 billion.

With WarnerMedia planning to launch proprietary SVOD service in late 2019, co-owning a rival service makes little sense.

Indeed, eliminating corporate headquarters, minority investments in Sky Mexico and Hulu, among other options, could generate AT&T upwards of $8 billion in cash, according to Stephens.

“If we’re successful in that, that would bring us down to that 2.5 [debt ratio] range [by the end of 2019],” Stephens said on AT&T’s Nov. 29 analyst day event. “We’re going to focus on getting that done. With our [$500 billion] balance sheet, we are in a very good position.”

The CFO contends AT&T will have free cash flows approaching $12 billion at the end of the year, which he said will be applied to reducing the debt. The company expects to generate $26 billion in free cash flow in 2019.

AT&T expects to generate $1.5 billion in cost savings (corporate overhead, procurement purchasing, marketing, etc.) and another $1 billion in revenue savings (churn reduction, cross-selling products) by 2021, including $700 million in savings by the end of 2019, $2 billion by the end of 2020.

“People who know our company, know we’re pretty good with cost synergies,” Stephens said. “Sharing assets and capabilities across the business, we can learn from them and WarnerMedia can hopefully learn from us.”

 

 

Netflix Continues Marvel Housecleaning, Cancels ‘Daredevil’

Faced with the impending launch of a rival Disney streaming service next year, Netflix appears to be eager to get out of the Marvel business.

The streaming service pioneer Nov. 29 canceled “Daredevil” after three seasons, the third of its shows based on Marvel Comics to get the axe in the past two months.

Netflix Oct. 12 canceled “Iron Fist,” followed a week later by “Luke Cage,” which it canceled the same day as the premiere of the third season of “Daredevil.”

The rapid elimination of its Marvel-based properties has led to increased speculation that Netflix was washing its hands of the franchise as Marvel owner The Walt Disney Co. prepares to launch its own direct-to-consumer video service, Disney+, late next year.

“Daredevil” had been the flagship of a heralded distribution deal between Disney and Netflix announced in late 2013 that would see the production of four series based on Marvel characters set in the same cinematic universe as the “Avengers” films.

The show, which premiered in 2015, focused on blind lawyer Matt Murdock, who used his acute senses to fight crime as a vigilante on the streets of Hell’s Kitchen, New York.

“Daredevil” was followed by “Jessica Jones,” about a super-powered NYC private investigator; “Luke Cage,” which focused on the bulletproof hero of Harlem; and “Iron Fist,” about a wealthy heir who returns to New York after a long absence having gained mystical martial arts abilities.

After a second season of “Daredevil” in 2016, the four title heroes joined forces in 2017 in the miniseries “The Defenders.” In 2017 “Daredevil” spun off “The Punisher,” about a veteran seeking revenge for the death of his family. “Jessica Jones” received a second season early in 2018.

The series were produced for Netflix by Marvel Television and ABC Studios.

“Luke Cage” and “Iron Fist” were both given two seasons on Netflix. While the first season of “Iron Fist” was generally derided by fans, its second season was praised as a positive turnaround by most critics, although its cancellation wasn’t seen as much of a surprise given lingering animosity toward the show. The elimination of the better-received “Luke Cage” was more eye-opening to industry observers, with the lack of renewal of “Daredevil” leaving little doubt as to the eventual fate of Netflix’s remaining Marvel shows.

A second season of “The Punisher” has completed production and is expected to debut early next year. A third season of “Jessica Jones” is currently in production.

Netflix never formally renewed or canceled the “The Defenders,” though in September it rebranded its “Defenders” Facebook page into “NX,” a label more encompassing of Netflix’s wider array of genre-based properties. Many fan sites interpreted this move as a sign that no further crossover adventures were in the works, especially since the first “Defenders” miniseries garnered a lukewarm critical reaction (its 77% Rotten Tomatoes critics score was the lowest of any of the preceding seasons, save for “Iron Fist,” and ranks it eighth among the 11 Marvel Netflix seasons).

Rotten Tomatoes listed the third season of “Daredevil” as the best-received Marvel Netflix season in terms of both critic (94% positive) and fan (96%) response since the first season of “Daredevil” three years ago (which earned 99% and 96%, respectively).

Global data measurement firm Parrot Analytics reported that “Daredevil” was the No. 4 most in-demand show in terms of online activity the week ended Nov. 24, more than a month after its third season debuted. However, Business Insider Nov. 28 speculated that the fate of “Daredevil” was uncertain, despite a #RenewDaredevil Twitter campaign advocating a fourth season, citing data from consumer-insights company Crimson Hexagon claiming interest in all the Marvel shows was down significantly since the franchise debuted.

At the same time, Netflix has been putting more emphasis on its own proprietary content, rather than licensing shows from third parties, as they do with Marvel.

In a statement to Deadline, Netflix stated that it was “tremendously proud” of the third season of “Daredevil” and felt “it best to close this chapter on a high note.”

Netflix also hinted that more adventures of Daredevil could eventually materialize in other mediums: “While the series on Netflix has ended, the three existing seasons will remain on the service for years to come, while the Daredevil character will live on in future projects for Marvel.”

What form this may take remains to be seen, given the apparent creative split between Marvel Studios, which handles the films, and Marvel Television. Disney+ has confirmed a new series based on the “Thor” and “Avengers” villain Loki, and rumors are swirling about additional series based on film characters such as The Scarlet Witch, Winter Soldier and Falcon, the latter two being sidekicks of Captain America. But these series would be handled by Marvel Studios and its executive producer, Kevin Feige, and not Marvel Television.

The 2015 separation of Marvel’s film and TV divisions left many fans wondering about how interconnected the Marvel Cinematic Universe’s television incarnation would remain. Thus far, MCU-set TV shows such as the Netflix group, ABC’s “Agents of S.H.I.E.L.D.” and Freeform’s “Cloak & Dagger” have referenced events from the films, but have not received reciprocal acknowledgement from any of the movies (though the Russo Brothers did acknowledge discussions about the feasibility of using characters such as Luke Cage in Avengers: Infinity War).

With Marvel Studios seemingly handling the Marvel programming on Disney+, industry observers have expressed skepticism about the pending service’s willingness to pick up Marvel Television productions that have already been canceled by other networks.

 

‘Avengers: Infinity War’ to Hit Netflix Dec. 25

Disney may be leaving Netflix, but not without a parting Christmas gift.

The Disney/Marvel blockbuster Avengers: Infinity War, which has earned more than $678.8 million at the box office, will come out on the streaming platform on Christmas day, according to Netflix.

The streaming platform’s NX on Netflix Twitter account tweeted, “Oh, snap. Avengers: Infinity War is coming to @Netflix on December 25.”

Disney is readying the unveiling of its own streaming service in 2019, Disney+, which will be fueled by Disney content, including that from Marvel and Lucasfilm, which has the “Star Wars” franchise.

After helping grow Netflix with a streaming deal in 2012, The Walt Disney Co. in 2017 announced it would be withdrawing its content from the service to build its own subscription platform.

At a May 14, 2018, MoffettNathanson Media & Communications Summit in New York, Netflix CCO Ted Sarandos was asked about the impact of Disney going direct-to-consumer and the pending loss of its original movies.

“People always ask me, ‘Where you surprised Disney is going to go direct?’ I don’t know what took them so long, exactly,” said Sarandos.

Still, he said the loss of Disney content wasn’t much of a blow.

“[Our subs] watch [Disney movies], but it wasn’t particularly passionate watching and those films are widely available on a bunch of other channels,” Sarandos said.

Disney Creating Star Wars, Marvel Series for Streaming Video Service

Disney’s Lucasfilm unit is in development on a second “Star Wars” live-action series for Disney+, the over-the-top subscription streaming video service launching in 2019.

The series will follow the adventures of Rebel spy Cassian Andor during the formative years of the Rebellion and prior to the events of Rogue One: A Star Wars Story. Diego Luna will reprise the role of Andor, which he originated in the 2016 movie.

The spy thriller will explore tales filled with espionage and daring missions to restore hope to a galaxy in the grip of a ruthless Empire. A release date has yet to be announced.

Disney+ is also creating (through Marvel Studios) a live-action series based on Loki, the god of mischief, to star Tom Hiddleston.

The new projects join a slate of movies and series planned for Disney+ that includes new stories set in the worlds of Pixar’s Monsters Inc., Disney Channel’s “High School Musical” and “Star Wars.”

Earlier this year, Lucasfilm revealed that Emmy-nominated producer/actor Jon Favreau would write and executive produce “The Mandalorian” for Disney+.

The live-action series, which is set after the fall of the Empire and before the emergence of the First Order, is currently in production with a lineup of directors that include Deborah Chow (Marvel’s “Jessica Jones”), Rick Famuyiwa (Dope), Dave Filoni (“Star Wars: The Clone Wars,”Star Wars Rebels”), Bryce Dallas Howard (Solemates) and Taika Waititi (Marvel Studios’ Thor: Ragnarok).

Disney’s Bob Iger Wants to Expedite Home Video Window

Following strong Q4 home entertainment and theatrical results, Walt Disney CEO Bob Iger said he has no plans to downsize the theatrical window as it relates to Disney movies transferring earlier to the company’s pending over-the-top video service, Disney+.

The same restraint, however, cannot be said about retail channels, including DVD, Blu-ray Disc and electronic sellthrough.

Speaking Nov. 8 on the fiscal call, Iger said that with the studio generating a record $3 billion in operating revenue – up 27% from a record $2.3 billion in the previous-year period – shortening the traditional 90-day window would only dampen revenue (and anger exhibitors).

Indeed, studio revenue reached nearly $10 billion in the fiscal year, up 19% from $8.4 billion last year.

“With us, if it ain’t broke … ,” quipped Iger, in response to an analyst’s question whether OTT video platform Disney+ afforded the studio opportunities to give consumers earlier streaming access to branded movies in the home.

Iger said Disney would continue fight to maintain the traditional theatrical window, which has been under (now measured) attack by Netflix.

“We have a studio that is doing extremely well and a [release window] formula that is serving us really well in terms of its bottom line,” he said.

Interestingly, Iger gave a shout out to home entertainment – his first in years – which he said continued to deliver strong retail results for digital and physical content. In fact, the executive said there is ongoing internal strategy about putting theatrical content into retail channels sooner.

“The home video window continues to be quite important to us,” said Iger. “You’ll likely see us protect that as well, although there’s going to be discussion around whether there’s an opportunity to move product into that window maybe a little sooner.”

Iger quickly clarified Disney was not looking to encroach – at the moment – upon the theatrical window.

Disney is ending a record year in home entertainment with five of the top-six selling DVD/Blu-ray Disc titles, including Black Panther, Star Wars: The Last Jedi, Coco, Thor: Ragnarok, Avengers: Infinity War, and just-released, Solo: A Star Wars Story. The titles — excluding Solo — have generated nearly $400 million in combined revenue since their release.

Sling TV Q3 Subscriber Growth Plummets

Dish Network Nov. 7 reported third-quarter (ended Sept. 30) loss of 367,000 pay-TV subscribers compared to a gain of 16,000 subs in the previous-year period – the latter largely attributable to an increase in Sling TV subs.

The Denver-based satellite TV operator ended the period with 10.28 million pay-TV subs compared to 13.2 million subs last year. Sling TV, the industry’s first online TV platform gained 26,000 subs – a fraction of the reported 240,000 subscribers added in the previous-year period.

Indeed, Sling TV, which was the first platform to offer standalone access to Disney-owned ESPN and has been offsetting Dish Network pay-TV sub losses since it launched in 2015, ended the period with 2.37 million subs. It ended 2017 with 2.21 million subs.

Dish TV’s average monthly subscriber churn rate (subs not renewing service) was 2.11% versus 1.82% for third quarter 2017.

It remains to be seen whether Dish decides to incorporate Sling TV with Amazon Channels, the ecommerce behemoth’s platform affording Prime members direct access to third-party over-the-top video services.

Services such as HBO Now, Cinemax, Lionsgate’s Starz OTT, CBS All Access, Showtime OTT and Cinedigm’s Dove Channel, have attributed much of their subscriber growth to Amazon – which in turn collects revenue-sharing and proprietary subscriber data for its distribution channel.

On the fiscal call, Charlie Ergen, co-founder and chairman of Dish, said the slowdown in sub growth at Sling had more to do with the growth of the OTT video ecosystem than consumer indifference.

“You’re seeing major [online TV] players that are all gaining subscribers, and everybody has a little different offering, a little bit different slew of channels, a little bit different interface,” Ergen said. “Obviously, Disney has talked about going direct to the consumer. So, you’re going to see an awful lot of people in the category, and at some point there will be too many, and at some point there will be a consolidation.”